Iranian Gov’t Promoting Competition in Insurance Industry

The government aims to promote competition in the insurance industry, the economy minister said at an annual event held to mark National Insurance Day on Saturday.

"We are looking to make the insurance industry more competitive," Ali Tayyebnia was quoted as saying by IBENA on the occasion of the 23rd national and ninth international conference on insurance and development. 

"Through Iran Insurance Company, the government will step forward to cover insurable risks and by embracing new forms of coverage, it will pave the way for the participation of the private sector."

This way, he said, the ground will be tested for the entry of new players and clear obstacles to the empowerment of the private sector. 

Iran insurance company is the largest and the only state-owned firm in the insurance industry with a 40% market share. 

On the state of the insurance industry, the minister announced that the premium incomes increased from 56.5% in 2013 to 59.3% in 2015.

"I have no doubt that a lasting change in the insurance industry will come about only when different viewpoints converge," he said.

Tayyebnia said economists have debated for years the role and status of the free market, the extent of government intervention in the economy and allocation of resources.

"There are strong views asserting that there is no necessity for the government to interfere. But the government and the market must jointly devote themselves to the allocation of resources because economic growth requires an effective market," he said.

The minister noted that he has been striving to increase the clout of the Central Insurance of Iran–the market regulator–and reduce government dominance since he took office. 

"The government has mobilized all forces to manage and reduce general risks and special insurable risks are on the insurance industries' shoulders," he said. "With a solid approach, insurance professionals must work to increase the diversity of insurable risks and help grow the insurance industry and the insurance penetration rate by selling new insurances."

Tax Relief 

The economy minister also announced that the VAT Removal Bill will be sent to the parliament by next month. If approved, the bill will exempt the insurance industry from taxes.

Tayyebnia then turned his attention to "astronomical salaries" received by a number of officials, which first made headlines a few months ago when it was brought to the attention of the people mostly through the social media.

"More than 200 billion rials ($ 6.2 million) worth of unconventional salaries were returned to the treasury and if anyone has made any violations, their case will be referred to the related body for further action," he said.

According to the minister, not many people had acted illegally by receiving inflated salaries because they were regulated, but after the incident "we have mostly set out to reform the guidelines and regulations".

A cap has been devised on the amount of remuneration allowed for executives and Tayyebnia said he is certain their salaries will not deviate from it and "if it does, it would be illegal"

 Also present at the event was the head of Central Insurance of Iran who spoke of the significant rise in insurance penetration rate in the country.

"Twenty-three years ago, the insurance penetration rate was 0.34%, which was the equivalent of 320 billion rials ($ 9.9 million)," Abdolnasser Hemmati added, noting that the penetration ratio exceeded 2.1% last year.

"The new figures register a sevenfold rise during the aforementioned period."

The official said the insurance industry pays 14% taxes on average and that is while insurance companies' profits come from a 3% share of the premiums. 

"In other words, the volume of taxes is not proportional to revenues and that is hurting the insurance industry," Hemmati said, before calling on parliamentarians to come up with a solution to rectify the situation.

The CII chief pointed out that 170 trillion rials ($ 5.2 billion) are invested in different insurance categories which, inclusive of bad debts, reach a total of 250 trillion rials ($ 7.7 billion). 

"The resulting number is equal to the country's development budget and is telling of the sector's potentials," he added.

According to Hemmati, Iran's insurance industry grew by 20% in the first seven months of the current fiscal year that ended in October, an amount which he says "will go up by the yearend in March".